The Tennessee Court of Appeals issued an opinion yesterday in a collection case, which has some really useful analysis on the reasonableness of attorney’s fees. This is an issue near and dear to my heart.
A full copy of the opinion, Tennessee Farmers Cooperative v. Ted Rains, M201801097COAR3CV, 2019 WL 3229686 (Tenn. App. July 18, 2019), can be found here.
Continue reading “Tennessee Court of Appeals shows analysis on “reasonable” attorney fees.”
A quick reminder: Tomorrow, June 6, 2013, I’ll be teaching the CLE presented by M. Lee Smith Legal Publishers called Creditors’Rights in Tennessee: 10 Collection Strategies.
This is a one hour audio seminar, that will cover the usual Tennessee collections lawyer song and dance. Things like:
It’s one hour of CLE credit, and, hopefully, what I teach you during seminar will put some money in your clients’ pockets.
I’ve done collections law too long to think of it in moral terms. I don’t think a person who doesn’t pay his bills is necessarily “bad” (though some are). Sometimes, I think the creditor is equally at fault for lending money or providing services to these poor folks.
But, I recently saw a Bankruptcy pleading that stopped me dead in my tracks.
It was a Motion to Voluntarily Dismiss Chapter 7 Bankruptcy Case, which is a filing a debtor makes to stop his bankruptcy case. People want out of bankruptcy for a number of reasons, but this one took the cake.
In it, the Debtor asked the United States Bankruptcy Court to dismiss his Chapter 7 because he wanted to, basically, wait a few more months to run up some more medical bills. Then, after that, he’d re-file his case and discharge those new debts.
The exact text from the Motion is this:
1. The Debtor filed a Chapter 7 bankruptcy on November 6, 2012.
2. The Debtor’s meeting of creditors is set for December 12, 2012.
3. Since the filing of this case, the Debtor has incurred extensive medical care and expects to have a surgery and additional medical care in the coming months.
4. The Debtor, therefore, desires this chapter 7 proceeding be voluntarily dismissed.
Without a doubt, that’s a tough situation for the Debtor, facing medical bills that he can’t pay.
But, what about that doctor or hospital who will be asked to provide those services? This is as close as “pre-meditated” default and bankruptcy as it gets.
The Bankruptcy Code allows a creditor to oppose discharge for some debts that are incurred immediately before Bankruptcy, including those incurred via fraud or bad intent. But, to do that, the creditor has to file a lawsuit to claim that the debt shouldn’t be discharged and that’s a burdensome, costly process.
In case you’re wondering, the Motion was granted.
Long story short, some doctor is going to provide goods and services in the near future that certainly will never be paid. Yikes.
This weekend’s Wall Street Journal ran a article on how to respond to bill collection efforts, called “When Bill Collectors Knock.” The article mixes good advice with a little bad advice. Here’s my bounce.
Good advice:
Take the call. It is virtually impossible to resolve a problem without addressing it head on. The best way for borrowers to handle a debt they can’t pay is to talk with the lender as soon as possible. Then they should work out a plan to keep the debt current with a smaller payment or to seek a temporary delay until they can pay something.
This is good advice. I talked about the importance of communicating with creditors in an earlier post. The worst thing a debtor can do is be silent, as that invites collection.
Unrealistic advice:
Keep detailed records. Staying on top of debt can be tough. But keeping records and careful notes can pay benefits if borrowers are sued.
I agree that it helps to keep payment records and copies of old invoices, but how realistic is that, particularly with debts that are years old?
But this is better:
Know the rules. Every state puts a limit on how long a creditor is able to pursue borrowers in court.
Your best focus, however, could be records showing your past payment. In Tennessee, the statute of limitations on debt collections is six years from the date of default. If you can provide that it’s been more than 6 years since your default, you may be able to obtain a dismissal of any action.
Bad advice:
Negotiate. Because debt is bought at a discount, collectors should be willing to bargain, perhaps accepting just a fraction of what is owed. If borrowers can come up with the money, they should be able to negotiate a settlement of 50 cents to 65 cents for each dollar owed…
Earlier, the article suggests that most unpaid debt collectors are collecting debts that they paid a mere four cents on the dollar for. So, the article suggests, you should haggle for payments in the range of 50 cents on the dollar.
While this may be true for some debts, in my experience, it’s not as common as the anecdotal stories suggest. The creditors I represent don’t buy debt and so any talk of ten cents on the dollar is a waste of time. Plus, even if a creditor has paid a small amount for a debt, that doesn’t mean that they will accept a small amount to settle, especially if the creditor perceives the debt can be collected in full.
Don’t get me wrong. I always say “Money Talks,” but if you’re making a low ball offer, you have to back it up with proof that your offer is the best you can do, and that requires proof of a debtor’s finances, other debts, etc.
My take-away this this: Over-communicate; Confirm that the debt isn’t over 6 years old (in Tennessee); and Money Talks (or, at least, proof of that the money you’re offering is the most the creditor will otherwise get).
Here we are, at the end of the year, and I’m worried about getting all my collection work done for my clients…as well as my collection work on my legal invoices. Yep, it’s the year end cash rush. Trees are being shaken. Happy Holiday emails have invoice reminders at the end. And, yes, unbilled time is being discovered and rushed out the door.
I’ve talked about the best practices for legal invoices to get lawyer bills paid.
This morning, I saw a tweet by @rocketmatter titled Legal Billing Rule # 1: The Longer You Wait The Less You’ll Get Paid.
This is great advice. The longer you sit on a bill, particularly on a complex matter, the less likely it is that the invoice will be paid in full.
If you don’t invoice time as you go, you run the risk of shocking the client when you send them 2-3 months of billable time. It is not good to shock a client with your bill. Clients are far more likely to pay bills as the case progresses, in manageable amounts.
Plus, if a client is going to object to the cost to litigate a complex matter, wouldn’t you rather they see the bills for work after one month of litigation? Even the most eagerly litigious client gets back to reality in the face of a zealous lawyer’s bill. Give them this information early, rather than after you’re neck-deep in depositions, Motions, and unbilled expenses. Yikes.
Lawyers aren’t cheap, and the practice of law is not the type of work that lawyers are willing to do for free. If you want to get your bills paid on a timely basis, get them to your client on a timely basis. If you sit on the bills for months and put a low priority on the invoices, then your client will put a similarly low priority on paying them.
Big news here at Creditor Rights headquarters: My wife and I are expecting a baby! We don’t know the gender yet, but we’re reading Baby Name Books cover to cover, looking for that perfect mix of tradition, syllables, and what sounds good.
One thing we’re not considering, however, is a Generational Title, i.e. “Junior.” The baby name experts say it’s a mix of good and bad.
From my perspective as a collections lawyer, I think it can be bad, because I’ve seen one generation’s financial and legal troubles wreak havoc on the other generation. This goes in both directions, with sons causing fathers trouble, and vice versa.
Just this past year, I’ve seen liens on a son’s land ostensibly attaching to the father’s land; wage garnishments on the father’s wages based on the son’s unpaid debt. Bankruptcies showing up on the wrong person’s name, etc.
Much of this stems from our online world, which often indexes information about us based on Name and Location (see Facebook). Two people with the same name who live (at some point) at the same address are going to confuse google, banks, property records, and everybody else.
You might not care about confusing your collection creditors (some people relish in this chaos), but, when one generation’s finances go bad, you’ll care about the impact on your ability to get a loan and sell your house, without having to explain the embarrassing details of your dad’s money troubles.
Don’t get me wrong: it’s a great tradition and a wonderful shared bond between generations. But, when one generation has legal or financial troubles, it’s not just a name that is shared–it’s also the dirty laundry of money mistakes.
Lately (i.e. in this economy), I’m constantly fighting over the enforceability of personal guarantees.
A personal guarantee is an agreement by which a third party agrees to personally repay another person’s/corporation’s debt. When a corporate entity doesn’t have a credit history or sufficient assets, a lender will generally ask for an individual to personally guarantee the debt. Creditors, obviously, want guarantees, because more parties obligated to repay your debt increases your chances for repayment. If a creditor files a lawsuit, it can obtain a judgment for the debt against all of the guarantors.
With the rise in defaults, guarantors are getting sued more than ever before. Their only defense is to attack the guarantee, and, as a result, the text of these agreements is constantly being tested. A common issue relates to the signature line(s): if a corporation’s president signs a contract that contains guarantee language, does the president need to sign twice, both as “Bob Smith, President” and then a second time as “Bob Smith?”
In the past, the overwhelming outcome was that there needed to be two signatures–one from the President and one from the Individual.
So, in that context, you’ll understand why I liked the recent Tennessee Supreme Court case of 84 Lumber Company v. Bryan Smith (Dec. 12, 2011). There, the Supreme Court looked only at the text of the contract. That text clearly said that the person signing the contract for the corporation was also personally obligating himself to serve as the guarantor. When the text is crystal clear, it doesn’t matter that there is only one signature.
So, even though the only signature on the contract was by ““R. Bryan Smith, President,” the Court said “[t]he explicit and unambiguous language of the contract points to only one conclusion: Mr. Smith agreed to be personally responsible for the amounts due on the account.”
A good practice would still be to get two signatures, but, in light of this case, it’s certainly not fatal to only have one signature.
I received a collection notice in the mail last week, from a Georgia law firm that domesticated a judgment for one of my Tennessee bank clients. I had subconsciously sat on their invoice for a month, mainly because I hated their invoice and didn’t want to forward it to my client.
It wasn’t for a lot of money, but I hated it because it didn’t tell a compelling story showing the value my client received.
The invoice didn’t have the hourly rate of the person providing services. The time spent for each task wasn’t itemized. The invoice provided only minimal details about the work provided. In short, it didn’t prove that value was given, and it didn’t tell a story.
If a lawyer is ever going to advocate, the time is when he’s asking to be paid. When I send out a bill, I always keep in mind:
Compare: the below one (1.0) hour billing entries:
“Legal Research on jurisdiction”
“Legal Research in Tennessee statutes and cases on issues related to Delaware corporation doing business in Tennessee and whether internet website justifies lawsuit filed in Tennessee”
Which one is more likely to be paid?
In Tennessee, you hear lots of talk of General Sessions Court, which is Tennessee’s version of small claims court. Of course, “small” is a relative term–General Sessions Courts in Tennessee have jurisdiction to hear civil cases with as much as $25,000.00 in controversy. See Tenn. Code Ann. § 16-15-501.
Trivia Time: In what three situations can a creditor obtain a judgment that exceeds the $25,000 jurisdictional limit in General Sessions Court? The Answer is after the jump.
Continue reading “How Small are the “Small Claims” in General Sessions Court in Tennessee?”
As a collections attorney, bad invoices drive me crazy. A collection lawsuit is only as good as the paper it’s enforcing, so when invoices have serious defects, it’s hard to do a good job, because the other side has easy defenses.
A common issue is an invoice (or credit application) that doesn’t get the borrower’s name right. For instance, the document doesn’t clearly identify and completely name the party buying goods. As easy as it sounds, this happens all the time, particularly when dealing with corporate entities.
As an example, let’s say your invoice is simply addressed to “Smith Contractors.” Is that an “Inc.,” a “LLC,” or “John Smith d/b/a Smith Contractors”? This is critical in determining who you sue. Even if the borrower writes down “Smith Contractors, Inc.,” there might not actually be a valid company set up under that name.
Here’s an easy fix: check out your prospective borrower’s corporate status on the Tennessee Secretary of State website, by using the “Business Information Search.” You should be able to locate any valid corporate entity, and, if you can’t find it, then you should ask more questions about the legal status or name of your borrower.
Trust me, it’s better to ask those questions on the front end, before you extend the credit. If you wait to do this after the account is in default, it is probably too late.
Creditors Rights 101 